Maynard McQuiston couldn't figure out why the couple he was advising wouldn't buy the insurance they needed. "They agreed on everything I proposed," he said, but McQuiston, a life and health insurance sales director for First West Insurance in Bozeman, Mont., and a member of NAIFA-Montana Mid, couldn't get them to act. "I found out later that the spouse didn't want to give me her height and weight ... [she] was just too embarrassed to give me the information."
McQuiston's story is a great example of how mistrust, intimidation or shame can make clients withhold information that is crucial to a good advisory relationship. Here are six things clients often leave unsaid and what you can do about them.
1. "I don't understand." "Without a doubt this is the most common thing," says Dave Shepard, an Edward Jones financial advisor, also in Bozeman. "I think too many people in this business either try to impress clients with their knowledge or assume that the client knows more than he actually does and therefore don't explain the basics."
How to deal with it: There isn't one telltale signal that clients give when they don't understand, according to Shepard. "It is often something they say—it can be obvious, like using the term 'interest' when talking about equities, but it's usually more subtle." Shepard is careful to ask questions like "What do you think would happen if ...?" during client meetings to test their understanding. He says, "I feel I'm on the right track when a client tells me, 'Thanks, nobody ever really explained that to me before.'"
2. "My kids/coworkers/friends say you're crazy." Someone's bound to tell your client that his neighbor's cousin's friend was burned by advice similar to yours. This makes the client second-guess you.
How to deal with it: Mitchell Caplan, CPA, J.D., president of Caplan Financial Group, LLC, and a member of NAIFA-Baltimore, says the best route is to divulge the downsides to your advice openly before the client even asks. Get "all the details—positive and negative—on the table," he emphasizes.
3. "If I don't like what you're saying, I'm not going to tell you." Nonconfrontational or intimidated clients are more likely to withhold their disagreements. For them, it's just easier to go elsewhere.
How to deal with it: Clients with stale accounts, closed accounts or accounts with other advisors are red flags for Shepard. It's time to build trust. "I can tell that I am doing a good job and that the needed trust has developed as clients begin to seek our advice about (and move) those other assets [to us]," he says.
Mistrust, intimidation or shame can make clients withhold information that is crucial to a good advisory relationship.
4. "You're undercharging me." Clients who disregard your advice often fall into this category. Take it from Caplan; he once advised two clients from the same law firm and kept his price the same when the third came his way. But that client had a more complex situation, and because Caplan was undercharging him, the client "perceived me to be somewhat of an amateur. ... He didn't do anything I recommended," he says.
How to deal with it: Value thyself. "If the price is set at a level at which the client doesn't bat an eye or even think about the cost, he probably perceives it to be 'cheap,'" says Caplan. "If I had presented the same detailed, comprehensive, well-thought-out financial plan and charged him a more appropriate fee, I would have stood a much better chance of his moving forward with my recommendations."
5. "If my account loses value, you're gone." It's a well-known concept in behavioral finance: Investors do almost anything to avoid losses, including shouldering more risk, and they are more emotionally affected by losses than gains. This might be what's going on when a client wants to know why you didn't put him in the XYZ stock that just made a mint for his barber/brother-in-law/softball buddy.
How to deal with it: This is not only an opportunity to discuss risk and basic portfolio theory with your client; it is also a situation in which you may also have to draw the line if the trust just isn't there. "Over the years I have suggested to a small number of clients—where I felt we were really not making progress—that they would be better off somewhere else," says Shepard. "Surprisingly, one of those clients said that if I cared enough about his business to fire him then I was probably giving him pretty good advice—he is one of my best clients today."
6. "I have a secret that could cost me." It might be a mistress that could create child-support issues, a litigious business partner who could wipe out your client's assets or a gambling habit that keeps your client from investing more. Not knowing makes giving good advice harder.
How to deal with it: "I say to [clients] each time, 'Other than the fact that you feel this way, is there any other reason you can't take action today?' If I keep answering all the objections and another one pops up, I'm not getting the real reason," says McQuiston. The bottom line is that you can get a lot more information out of a client if you know what to look for, but there are some things they just aren't going to tell you.Tina Orem is a freelance writer based in Eugene, Ore.